BEIJING, Aug 9 China's Premier Wen Jiabao urged nations to work
together to stabilise turbulent financial markets on Tuesday as global stocks
stumbled on fears that the world economy is headed for a downturn.

Speaking after a regular meeting by the Chinese cabinet, Wen alluded to debt
problems in the United States and Europe and called on "relevant" countries to
implement responsible monetary policies and rein in fiscal deficits.

This is the first time Beijing has publicly commented on the shakeout
unfolding in global markets after the United States lost its top-rated credit
rating and as Europe's debt crisis worsens.

In a sign that China may soften its policy stance in the face of mounting
uncertainties, Wen toned down his inflation rhetoric by omitting Beijing's usual
refrain that fighting inflation would be a priority.

Instead, Wen only said Beijing should "try its best to curb price rises" and
he noted China's economic policies are showing positive results.

"We urged relevant countries to take responsible monetary and fiscal
policies to cut fiscal deficits and properly manage the debt crisis, to ensure a
stable performance of global markets and maintain investor confidence," he said.

"The global community should improve the communication and coordination of
their macro economic policies to realise sustainable, stable and balanced growth
in the world economy," Wen was quoted by state radio as saying.

Qiao Yongyuan, an analyst at the CEBM in Shanghai, said it may be too early
to judge whether China is shifting its monetary policy stance, but said
uncertainty abroad would likely lead Beijing to stand pat for now.

That is in line with a growing market consensus that China would hold off on
raising rates for now, a marked shift from two weeks ago when many thought
stubborn price pressures would lead Beijing to raise interest rates once more
this year.

"In coming months, Beijing would basically take a wait-and-see approach, and
neither relax its policies or further tighten until it gets a much clearer
picture on the external economy," Qiao said.

Still, unlike previous months when Beijing has said repeatedly that fighting
inflation is a policy priority, Wen did not reiterate that line even though data
had showed on Tuesday that inflation quickened to three-year highs of 6.5
percent in July. That is well above Beijing's 2011 inflation target of 4
percent.

Wen's remarks came as world stocks dropped for the 10th day running on
Tuesday on fears the global economy could fall into another recession.

Making clear that Beijing is closely watching the market rout, Wen said
there is a need to stay calm and guard against dangers. He welcomed the Group of
20 nations' vow on Monday to do all that is needed to keep financial markets
stable and the world economy growing.

"We need to calmly watch the situation and make cautious responses to be
fully on guard against risks," he said.

As the world's largest foreign buyer of U.S. Treasuries, Beijing wants to
see a healthy dollar and U.S. economy to protect the value of its $3.2 trillion
foreign exchange reserves, two-thirds of which are estimated to be invested in
dollar assets.

China has in the past week urged Washington to get its fiscal house in order
through a mix of pleas from top officials and sharp criticisms in state media.

China's Vice-Premier has spoken to U.S. Treasury Secretary Timothy Geithner
and exchanged views on the state of global financial markets and the world
economy, China's Foreign Ministry said on Tuesday.

But rather than focus its energy on pressuring foreign governments to tackle
the turmoil in markets, some analysts said Beijing's efforts are better spent
cleaning up its own local debt mess and cutting China's dependence on exports.

"Right now, there is little China can do to address the current global
financial market turbulence," said Gao Shanwen, an analyst at the Essence
Securities in Beijing.

"With global commodity prices starting to ease and Chinese domestic
inflation expected to slow accordingly, it is a good chance for China to solve
its own problems, such as cleaning up local government debt."

To pay for infrastructure projects, local Chinese governments have chalked
up an estimated 10.7 trillion yuan worth of loans. Some economists believe this
is among the top risks threatening the world's No. 2 economy as they estimate
that up to a quarter of loans could sour, saddling banks with bed debt.

Next In Bonds News

WASHINGTON, Dec 9 The U.S. Senate passed
legislation on Friday to fund the government through April and
sent it to President Barack Obama for signing into law, after
Democrats who sought more generous healthcare benefits for coal
miners stopped delaying action on the measure.

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